Seller Tax Responsibility
CAPITAL GAINS TAX
The seller must pay capital gains tax. This tax is levied on the increase in the value of the property, that is, the difference between its price on the date of purchase and the sale price. Its value is 21%. Any additional cost present in the sale of the home can be deducted as long as they are accompanied by the corresponding invoices. Therefore, all the taxes inherent to the purchase, notary and legal expenses, etc. can be deducted in the calculation of capital gains tax.
Residents exempt from declaring this tax are:
- Those over 65 years of age and who have lived in the same property for a minimum of three years.
- Those who reinvest the net proceeds from the sale in the purchase of another property within 2 years.
CAPITAL VALUE TAX
The seller is responsible for paying the Capital Gains Tax. This tax is levied by the local Town Hall and is based on the value of the area where the property is located and not on that of the property (the value of the property does not influence the Plusvalía tax) between the date of purchase of the property and the date it was sold. The value is established by the City Council according to the cadastral value of the land and the number of years it has belonged to the seller.
Typically, the seller is responsible for paying any liens on the property, such as mortgages.
If the buyer is going to make the purchase of the property through a bank mortgage, he could consider changing the name of the mortgage from seller to buyer (always considering the terms and conditions of the existing mortgage) since in this way it could be more cheaper than applying for a new mortgage.
What must be taken into account when selling a property?
If the seller has owned a property for less than 10 years, but is not a resident, it is important to know that the buyer is obliged to retain 3% of the purchase price and deliver it to the Spanish Treasury. In this way, the Government ensures that the buyer will pay the corresponding tax derived from the sale of real estate capital in his personal income tax. Once the exact amount has been calculated, the seller will receive a refund or an additional payment will be required to cover the total payment of the tax.
If the seller does not withhold this amount from the buyer, he must know that he becomes responsible for the payment of this tax.
CADASTRAL VALUE AND SALE PRICE
Often in Spanish society, a sale price much lower than the real value is declared with the aim of reducing the taxes that both buyer and seller had to pay. Currently the Spanish Treasury remains very vigilant to eradicate these practices, so if the government appraisers estimate that the declared price of the property is very low, high penalties are imposed.
In our real estate we recommend our clients to consult with our managers the ways to do things correctly.
The attorneys and managers who work with Redding Real Estate are highly experienced and knowledgeable about all current legal and tax regulations. We are at your disposal to help you and offer you our services.